Govt may cut lock-in under Rajiv Gandhi equity scheme to 1 year
New Delhi: The government is likely to reduce the lock-in period under the Rajiv Gandhi Equity Scheme for new equity investors to one year from three years proposed in the Budget 2012-13 and a circular to this effect could be issued within a month, official sources said.
"We discussed the issue of reduction of the blanket lock- in period to one year. We will meet the stock exchanges again and finalise the modalities," they said after meeting the representatives of BSE, National Stock Exchange, MCX-SX and other exchanges.
Retail investors, they said, would be allowed to invest in top 100 listed entities in BSE and NSE under the scheme which was unveiled by Finance Minister Pranab Mukherjee in the Budget 2012-13.
The Minister had announced 50 per cent tax deduction to retail investors with annual income of less than Rs 10 lakh for investment up to Rs 50,000 in a year with a lock-in period of three years under the Rajiv Gandhi scheme.
It was later clarified that a retail investor can avail of the scheme only once in a life time. This is the first- ever tax benefit scheme announced by the government to encourage retail investors participation in the equity market.
Such a type of scheme was first introduced in Belgium, followed by France and some East European countries.
The scheme was highly successful in France and had helped in increasing retail participation in equity market from 7 percent to 17 percent, sources said, adding it was also appreciated by IMF Managing Director Christine Lagarde in her meeting with Mukherjee last week.
By offering this scheme, the government aims at channelising household savings into stock markets.
Besides, Mukherjee in his Budget had also proposed to cut the Securities Transaction Tax (STT) from 0.125 percent to 0.1 percent with effect from July 1 to reduce transaction cost for equity investment.